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Car PC's are custom installations. Beyond the basics of ensuring that a car PC is installed safely, there is no 'right' way to do it. Some hobbyist prefer their installs to appear as if they came from the factory while others don't care if there is a tangled mess of wires strewn across the dashboard. It's all up to your personal preference.
This means a considerable amount of research and planning must be undertaken by the hobbyist to solve specific problems associated with placing a computer in a mobile environment.
Below is a list of things that a carputer can (possibly) do. This list is by nature never complete. Why would anyone want a computer in their vehicle?

The answer can be summed up in one word:

Convenience

This may seem contradictory, considering that computers require a good deal of maintenance in order to maintain stability. There are software updates, new hardware, the occasional system crash, and other aspects of computing that make it far from convenient. The goal of every vehicle computing hobbyist is to minimize the need for all of these, and there are a variety of approaches to do so.
The convenience comes in when you have a centralized system for all the functionality you want from your PC, as opposed to multiple gadgets for each function. A single PC can provide music file playback, DVD playback, satelite radio, GPS navigation, diagnostic information from the vehicle (usuall OBD-II), internet access and hands-free cellphone operation. In order to achieve all that with individual products, you'd need a high-end audio/video system, a GPS system, a satellite radio receiver, a scan tool for diagnostics, and a device capable of internet access such as a PDA or a laptop. The PC will usually be cheaper than all the gadgetry involved for all that functionality, not to mention you'll have central control of all the functions, ideally through a safe driver-friendly interface.
Show cars are increasingly using computer control for many systems, including operation of mechanical systems such as power windows and locks, actuators to open hatches or doors, and so on.
One of the favorite responses among CarPC hobbiests when asked what ll they can do with their CarPC:

Anything you can do with a desktop computer can be done with a vehicle computer.

The only limits to what you could have your carPC do are in your own imagination. Typical system

A typical Carputer system is composed of four parts:

Machine

Laptops / Notebooks

Apple / Macintosh

Windows

Linux

DOS

Displays

Interface Hardware

Power

Machine

The machine is the heart of a carputer system. Based on budget, enthusiasts can easily incorporate and install essentially any computer. Back in 1999 - when hardware prices were still pretty high and laptops were thousands of dollars, the first carputer systems were based on hardware such as 233 MHz desktops. Prices have come down so much on small form motherboards that even those on a budget can build a small machine for little money. There is a growing market of used carputer hardware for sale - which helps the beginner afford a system and learn the ropes.
In 2007, many carputers run at CPU speeds in excess of 2 GHz. Typical memory varies from 512MB to 1GB. As always, performance and flexibility will be a function of the available processor and memory resources.
However, there is a point of diminishing returns here. As a user, you will need to ask yourself if that 3.4GHz Hyper Threaded processor is going to gain you any benefit in the car. You will have to figure out how to cool it adequately and how to power it since CarPC power supplies are not all that powerful at this time.
The machine can run on any platform including Apple / Macintosh, Windows, Linux, or even DOS. Displays

You have to be able to command your carputer system. Preferably, this process should be as easy as possible. Initial carputers (pre-2000) typically used LCD or VFD character displays to interface and play music. Commands were typically sent to the carputer by means of a keyboard. Not far after the initial advent of the carputer, many people started using a wireless serial port remote to control their machines. This was about the time that small TV screens became affordable. The majority of the first (affordable) carputer screens were RCA video input only, not VGA input. To learn about the differences between VGA and RCA screens, please see this FAQ.
This awkward phase of sub-par display devices was frustrating to the carputer community. Users had difficulty justifying $1000+ for a VGA Touchscreen, and for the most part, screens that nice were rare or just unavailable. Modern screens are leaps and bounds better than those of just a few years ago.
The most common modern-day screen that people use is the 7 inch VGA touch screen. One of the issues that still make these screens less than ideal is daytime visibility. Now even solutions to this problem are surfacing. There are transflective options as well as other enhanced screen options. This is sure to improve at a rapid pace as the demand for more viewable daytime screens increases. Interface Hardware

In addition to the touchscreens, many other options exist to interact with a CarPC in a manner that does not distract the driver from the most important task - keeping the car on the road.
Wireless keyboards are commonly used in the CarPC environment to manage and maintain the system.
Other alternatives for control involve the use of either IR or RF connected remote controls for hands-only, driving-friendly control.
Another notable mention, although technically a software more than hardware, but a very versatile & popular interface option is Girder, which will allow almost unlimited control integration of hardware to software control. It will allow you to custom program a remote control, or integrate many different possibilities of hardware button controls, from a custom built button interface using anything from a keyboard matrix to a simple keypad. Girder is worth checking out if you are after custom controls. Power

Once you have your machine and your displays a long with all of the other gadgets that you want for your carputer you will need some way to power it.
It all comes down to two options:

A power inverter

A DC-DC power supply

Your car's battery puts off 12 volts of DC electricity. Computers natively utilize DC power as well. Because most computers are used in the home or office, they must be able to convert the electricity that comes out of the wall (which is AC curent) to DC current. This is where you will need a power inverter to convert the DC current from the car to AC current that the computers power supply can utilize. Then the computer power supply converts the AC power back into DC power so that the computer components can utilize it. In short, if you choose to use a standard computer without a CarPC specific power supply you will need a DC-AC inverter.
Your other option is to use a DC-DC power supply (such as a M2-ATX) which will allow you to connect the 12 volt DC power from your car to your computer. Most DC-DC power supplies have other features such as an ignition switch which will turn your computer on when your car is started and will send a signal to go through a soft shut-down process or put the computer into stand-by or hibernation. Most of these DC-DC power supplies also incorporate an amplifier turn-on signal which is timed to not send a turn-on signal until the CarPC has alredy started the boot-up process. This feature is usually configured to prevent amplifier turn-on thump which can not only be very annoying, but can also damage your speakers.
To learn more about the various DC-DC power supplies, you can read in this fourm: PSUs. You can also purchase many of these power supplies here on our very own MP3Car.com store. Considerations in Choosing Hardware

Space Availability

There is a limited amount of space available in any vehicle for installation of any additions. For a computer installation, "smaller is better" is the general rule. The smaller form factors of motherboards and systems make popular choices for vehicle installations. Not only for space, but for power requirements and for heat generation.

Pico-ATX

Pico-ITX motherboards are new to the market and are now the smallest motherboard avaliable on the market. With a form factor of only 4.5" X 3.3" (10cm x 7.2cm) these boards are ideal for vehicles with little space. You can read up on this form factor here.

Nano-ITX

Nano-ITX motherboards are another small form factor. As with all small-sized electronics, they are more expensive. Due to the limitations of the small size, they are also lower in computing power compared to a typical desktop PC. Nano-ITX motherboards measure 4.8" X 4.8"(12cm X 12cm). You can read up on this form factor here.

Mini-ITX

Mini-ITX motherboards are small enough to fit in a standard DIN-sized dash opening. Via makes a range of motherboards with built-in CPUs that range in speed from 600mhz to 1.5Ghz. There are also models that will accommodate a P4 CPU. They measure a little less than 6.7" X 6.7" (17cm X 17cm). You can read up on this form factor here

Micro-ATX

Micro-ATX motherboards are designed to mount in a case designed for its larger ATX counterpart, yet still be smaller in size. The official specification calls for a maximum size for 9.6" X 9.6" (24.4cm X 24.4cm), although many are not as large as the maximum specification. Micro-ATX motherboards exist for any CPU manufactured.

Flex-ATX

Flex-ATX motherboards are an addendum to the micro-ATX standard. They will mount to a full-size ATX case, but the specification calls for a maximum size of 9" X 7.5" (22.9cm X 19.1cm). Like Micro-ATX motherboards, there are models to accommodate any CPU on the market.

Shuttle

Shuttle brand motherboards and PCs do not fall into any of the form factors above. They utilize their own mounting scheme for motherboards and cases. There are Shuttle models that are compatible with every CPU manufactured. A Shuttle form factor motherboard measures just under 8" X 8" (20.3cm X 20.3cm). It is important to note that Shuttle also manufactures motherboards in other form factors such as MicroATX and ATX.

Heat Dissipation

Heat is the enemy of all electronics. Keeping a computer cool is necessary in order to keep it stable and trouble-free. Computer components generate heat that must be be removed from the general vicinity of the component(s). Generally, lower-power hardware generate less heat, but it still must be dealt with to ensure stable, reliable operation. Power Consumption

There is a limited amount of electrical power available in a vehicle and there is a limited amount of power avaliable through the currently avaliable DC-DC power supplies. As such, the amount of power drawn by the PC must not overload the vehicle electrical system or DC-DC power supply so that the important systems of the vehicle will be able to operate. Computing Power

Every task a computer performs utilizes CPU cycles and memory. The faster the CPU goes through the cycles, the faster the task will be performed. For a vehicle installation, the CPU needs to be able to perform all of the processing tasks required in the vehicle. Some tasks, such as DVD playback and video recording, require a good deal of CPU speed, while other tasks such as music play back and internet access do not.
One of the more common motherboards used in vehicle installations, the EPIA M10000 by Via, has a 1Ghz C3 CPU and is adequate for most vehicle tasks.
Obviously, faster CPUs will result in faster performance. Other Aspects of a Carputer Install

Sound

Most motherboards include on board sound. They can range from 2 channel up to 8 channels depending on the motherboard. Some include SPDIF (COAX or Toslink optical out) as well. You can however upgrade your sound card to achieve better sound results or to do features that on board sound cannot do. You should plan ahead and figure out if you only 2 channel, 4 channel, 5 channel, or more depending on how you want to control the speakers in your car. A common question that arises is: Should I use onboard sound or an upgraded PCI or external soundcard?System Features

NOTE: Some of the features/ideas below may be illegal to run while a vehicle is in operation. Users should always check current local laws regrading proper use of their systems.

Music

Play music from CDs, hard drive (MP3s, other compressed files) or external device (USB/PCI FM radio receiver, etc.)

Benefits over a head unit with music file (MP3/WMA) playback:

Support for additional formats, such as loss-less OGG, as well as DRM-protected files (via iTunes or WMP).

Faster indexing of songs (useful when there are hundreds or thousands of songs).

Ability to directly download songs (via cellular data connection, or Wifi if close to an access point).

Using your GPS receiver, store logs of locations vs speed and time of day. This could be uploaded to a collaborative site for predicting travel times vs time of day (very useful in areas where freeway congestion is variable).

Provide real-time tracking of vehicle location.

Get live traffic data (requires GPS that supports this feature)

Combined with wireless internet use mapping software (e.g. Google Earth) or web pages with live display or to route or do geographic searches.

Satellite Radio

Satellite radio through external receivers.

View XM's NavTraffic via your carpc.

Wireless Internet

Note: This topic includes both wireless cellular services such as GSM, Edge, and EVDO as well as local wireless ethernet Wifi (802.11, access point) connections which are different and should not be confused).

Run an emulator and have accessibility to any game that you have a backup copy of. This can range from Atari 2600 and Sega Master System to Nintendo 64 and Playstation. The emulator you can run is only limited by the systems resources. Alternately include an actual gaming system in the car.

Connect a controller from the system of your choice to your CarPC. Microsoft Xbox controllers are very simple to modify yourself and drivers are readily available. If you prefer a controller from another system there are companies that sell them with USB connectivity pre-wired.

Display video from car mounted camera for backing up. (infrared cameras are available for backing up at night)

Record video from a webcam/mini-dv camera and store it to the carpc for later perusal. (good for recording close calls on the freeway - setup a rolling buffer which stores the last X minutes on button press)

Provide night vision capability with infrared cameras.

Process video from car in real-time using image recognition software. Capture license plates and store in database with GPS location.

Gain control of ignition timing, air/fuel maps, shift points, boost control, top speed, rev limits, etc. (WARNING: This requires a thorough knowledge of vehicle systems and should only be attempted by qualified individuals)

Other Devices

Radar Detectors (e.g. the Valentine V1 by using the remote display)

Add a small printer to print a map for someone else, or print a quick report for work.